Gold (XAU/USD) has risen above $4,300, reaching its highest level since October 21. This increase is fueled by the Federal Reserve’s cautious approach. Meanwhile, the US Dollar is struggling near a two-month low as traders await key speeches from important FOMC members. Ongoing tensions between Russia and Ukraine also add geopolitical risks, making Gold a preferred safe haven. Recently, the Federal Reserve cut borrowing costs by 25 basis points, leading to speculation about future rate cuts. This has given Gold bulls motivation, with prices likely to continue climbing. However, strong performance in Asian stocks could reduce Gold’s demand. Currently, there is little US economic data to analyze, leaving market activity dependent on FOMC speeches and general risk sentiment.

The Bullish Breakout

Gold’s breakout past $4,245-4,250 positions it for further gains, but it faces immediate resistance at $4,300. If prices pull back, buyers may find opportunities around $4,200, while deeper losses could follow if that support breaks. On the other hand, breaking above $4,328-4,330 could propel Gold towards its October peak of $4,380. Sustained buying above $4,400 could strengthen this upward trend. The US Dollar is the world’s primary currency, greatly impacted by the Federal Reserve’s interest rate decisions and economic strategies like quantitative easing or tightening. These factors significantly influence the Dollar’s value compared to other currencies. With the Federal Reserve’s dovish position, Gold’s trend seems upward. It’s a good time to increase long positions since lower interest rates reduce the cost of holding non-yielding assets like Gold. Any pullback to the $4,250 breakout zone should be viewed as a buying chance in the near future. The Fed is clearly concerned about the slowing economy, marking a major shift from its previous focus on inflation control. With the unemployment rate recently rising to 4.4%, the central bank seems willing to accept inflation, which was recorded at 3.5% in the November 2025 CPI report, to foster job growth. This policy adjustment is the key reason for the weak US Dollar and rising Gold prices.

Derivative Plays

In terms of derivatives, buying call options on gold futures with strike prices around $4,350 and $4,400 looks promising, aiming for a retest of the all-time high near $4,380. At the same time, the ongoing weakness of the US Dollar makes purchasing put options on the Dollar Index (DXY) a sound strategy, directly reacting to the Fed’s policy approach. This market behavior mirrors the response we saw after the Fed’s policy shift in late 2023, which sparked a major rally in risk assets and precious metals. Since breaking the $2,500 threshold in early 2024, Gold has been on a steady upward path, and this dovish shift only adds momentum. We should monitor the $4,200 level closely to manage risk on our long positions. Ongoing conflicts between Russia and Ukraine further support Gold’s appeal as a safe haven. This geopolitical instability recalls the energy shocks of 2022, indicating that any aversion to risk in the broader market will likely benefit Gold, creating a solid price floor and limiting potential declines. Create your live VT Markets account and start trading now.

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